HispanicBusinesses&Entrepreneurs ......2012-2015 2007-2012 0.5% 0.4% 7.5% 5.5% HispanicOwnedFirms...

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Hispanic Businesses & EntrepreneursDrive Growth in the New Economy

3rd Annual Report 2015

TM

Fo r ewo rd

Javier Palomarez, President & CEO of the USHCC

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Hispanic entrepreneurs are America’s business future. This thriving community numbers more than 4 millionHispanic-owned businesses that will together contribute in excess of $661 billion to the American economythis year.

The United States Hispanic Chamber of Commerce (USHCC), the country's largest Hispanic business organization,advocates on behalf of these enterprises through our network of more than 200 chambers and businessassociations, as well as over 198 major corporate partners nationwide.

The USHCC is proud to partner with Geoscape, one of the nation’s leading business intelligence firms, to launchthe third Hispanic Business and Entrepreneurs report. This annual study tracks the growth of Hispanic-ownedbusinesses, their impact on the American economy, and the burgeoning household wealth of Hispanics.At the USHCC, while we are proud to advocate on behalf of business owners who happen to be of Hispanic

descent, we never forget that we are first and foremost American businesses. Every tax bill we pay, every job we create, every product we manufacture andevery service we provide goes to benefit our nation’s economy.

Cesar Melgoza has emerged as one of our nation's preeminent thought leaders. As the founder and CEO of Geoscape, the visionary research created underhis leadership highlights the economic impact of America's expanding Hispanic business community.The findings in this report serve as a reputable source of information for policy makers, corporate executives and researchers who seek a complete andinsightful understanding of the Hispanic market and its thriving entrepreneurial community.

The significance of this study cannot be overstated. The insights presented in the report shed light on the economic impact of this vibrant entrepreneurialsegment and make bold predictions of unprecedented growth in regions not traditionally associated with large Hispanic populations.

A lthough much deserved attention is paid to the dramatic growth of U.S. Hispanic consumers, Hispanicbusinesses also have become a strategic growth opportunity within the U.S. economy. That is why Geoscapeproduces this annual report. Businesses owned and managed by Hispanic professionals are increasingly likely toemploy American workers of all backgrounds and contribute progressively more to the tax revenue of local, stateand federal government entities – enabling our economy to stay strong. Furthermore, the well-being of Hispanicbusinesses is in the interest of all Americans and others who depend on the U.S. economy. That is, as thenon-Hispanic white population ages, retires and depends on social security and pensions, Hispanic entrepreneurswill begin to bear more of the burden to thrust the economy forward. Hispanic entrepreneurs are more youthful,connected digitally and more socially engaged than non-Hispanics overall. However, this asset must not beneglected; it is everyone’s business to support the prosperity of Hispanic businesses because the multiplier effect

of their growth will need to fuel more American jobs and income in the years to come. In the face of difficult circumstances gaining employment incorporations, Hispanics create their own path to wealth through entrepreneurship – this is an American value that Hispanics embrace wholeheartedly.

In this report, you’ll find that Hispanic businesses are growing at more than 15 times the rate of all U.S. firms. You will also see that Hispanic businessescontributed over $600 billion in revenue to the national economy in 2015 – that number will continue to increase. Additionally, you will find that the regionsof growth may not be those you would expect, as Hispanic households and businesses spread throughout the nation. We look forward to your comments onthis report so that we may continue to evolve this publication into a more useful resource that guides decision making at all levels.

3rd Annual Report 2015 Geoscape®

E x e c u t i v e S u mm a r yCésar M. Melgoza, Founder & CEO, Geoscape Twitter: @cesarmmelgoza

T: 888.211.9353 I E: [email protected] I www.geoscape.comTwitter: @geoscape

A Surge of Hispanic-Owned Businesses in the U.S.

New entrepreneurs in the United States are increasingly diverse, with morethan 40 percent of current entrepreneurs identifying themselves as AfricanAmerican, Hispanic, Asian or other non-white.The trends indicate that Hispanics are the mostlikely to become entrepreneurs.And new data from Geoscapefor 2015 supports that premise.For 2015, the number of Hispanic-owned businesses is expected toincrease to more than 4.07 million, an astounding57 percent increase since 2007. Growth of Hispanicfirms is being fueled by small business owners that areprimarily in service and trades industries. And revenue for Hispanic-ownedfirms is expected to reach $661 billion, a 28 percent increase since 2012.Moreover, the average annualized percent increase in the number ofHispanic-owned firms has outpaced all U.S. firms for the last decade.This can be attributed to the fact that non-Hispanic baby boomers are retiring at afaster rate than the minority groups, which results in their decreasing share of firms.

A ll race and ethnic groups experienced an increase in newentrepreneurship between 2003 and 2014. The most recentdata shows the Latino share of all new entrepreneurs risingto 22 percent, compared to 16 percent in 2003. The Asian sharealso rose substantially during this same period. The White share,on the other hand declined 9 percent over the same period.

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68%

9%

16%4% 3%

2003

. . . . .White Black Latino Asian Other

3%7%

22%

9%

59%

2014

4.07 MillionHispanic-owned

Businesses

Growth Annual Percent Increase in Number ofHispanic-Owned Firms versus All U.S. Firms.

2012-2015

2007-2012

0.5%

0.4%

7.5%

5.5%

. .Hispanic Owned Firms All Firms


Number of Hispanic-Owned Businesses in the U.S.

2007 2.6 Million

2012 3.32 Million

2015 4.07 Million (projected)

2002 1.6 Million

Changes in the Ethnic Composition of Business Owners


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The number of Hispanic-ownedbusinesses and entrepreneurs in theU.S. has grown dramatically over thepast decade and despite the recession,Hispanics continue to experience ahigher rate of self-employment than thegeneral population at large.

While the Hispanic population acrossthe Midwest is still small compared totraditional population centers in theSouthwest and Florida, the fastestgrowing regions for Hispanic-ownedbusinesses from 2012 to 2015* are inthe West North Central and East North

Central divisions, which areprojected to grow by 30 and 29percent, respectively. This increasecan be attributed to the migration ofHispanics into the region for jobs, localand socioeconomic conditions,including customer base, industrialcomposition and the low cost of living,relative to other regions.

The Pacific Census division continuesto be the largest division forHispanic-owned businesses with aprojected 1,057,301 Hispanic-ownedbusinesses by 2015*, a 22 percent

increase since 2012. This is followedby the South Atlantic division which isprojected to reach 963,932Hispanic-owned business by 2015.

West South Central is the 3rd largestU.S. Census division with a projected911,829 Hispanic-owned businesses,a 25 percent increase from 2012.

+22%Pacific

+26%Mountain

+26%New England

30%West NorthCentral

+25%West SouthCentral

+26%East SouthCentral

21%SouthAtlantic

+20%MiddleAtlantic

+29%East NorthCentral

3rd Annual Report 2015 Geoscape ®

Percent Increase in Hispanic-Owned Businesses by U.S. Census Division 2012 to 2015*

*Projected


P53rd Annual Report 2015 Geoscape ®

Businesses Ownership by HispanicityTM Segment

Percentage of Business Owners and Self-Employed by HispanicityTM Segment

. . .All Hispanics Hispanic Business Owners Self - Employed Hispanics

37%39%

27%

13%17%

12%

17%19% 20%

25%

20%

33%

8%5%

9%

Hispanicity is a proprietary metric developed byGeoscape to measure the degree to which people ofHispanic heritage in the United States retain elements oftheir Hispanic culture while they acquire elements of theAmerican culture.

An interesting aspect of Hispanic business owners inthe U.S. is the diversity across the various acculturationsegments. For instance, close to 60 percent of Hispanicbusiness owners are bilingual and bi-cultural, fitting intoGeoscape’s Hispanicity classifications HA2 through HA4.These entrepreneurs tend to be comfortable in bothEnglish and Spanish and identify with both cultures.

Approximately 40 percent of Hispanic business ownersbelong to the “Americanizado” or HA1 segment, while20 percent belong to the “Hispano” or HA4 segment.According to the same data, 27 percent of Hispanics whoare self-employed belong to the “Americanizado” or HA1segment, while 33 percent belong to the “Hispano”or HA4 segment.

• English dominant(nearly no Spanish)

• Born in US 3rd+ generationFew Hispanic cultural

practices.

HA1: Americanizado HA2: Nueva Latina• English preferred(some Spanish)

• Born in US 2nd generationSome Hispanic cultural

practices; oftenretro -acculturate.

HA3: Bi-Cultural• Bi-Lingual

(equal or nearly)• Immigrant as a child

or young adult.• Many Hispanic cultural

practices.

HA4: Hispano

• Spanish preferred(some English)

• Immigrant as adult, inUS 10+ years

• Pre-dominant Hispaniccultural practices.

HA5: Latinoamericana

• Spanish dominant(nearly no English)

• Recent immigrant as adult,(less than 10 years ago

• Primarily Hispanic culturalpractices.

TM


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Hispanic Business Owners Wealth Statistics versus All Hispanic Households

Hispanic Small Business Owners versus All U.S. Households

Financial independence is also one of the main reasons so many immigrants choose to start their own business. Recent datashows that Hispanic business owners are 1.5 times more likey to be in the >$150K/per year income bracket than Hispanics overall.Furthermore, Hispanic business owners are 46 percent more likely than Hispanics overall to earn between $25k-$49k annually.

Higher business formation rates among the foreign-born may be driven by necessity, especially when the economy is bad.Because of limited job opportunities after the recession there appears to be an even greater response of starting businesses amongHispanics versus the general population, which may have to do with lower-skilled workers having more difficulty in finding jobs.30 percent of Hispanic Households who identify themselves as small business owners earn more than $100,000 per year.Comparatively, 23 percent of all U.S. Households earn more than $100,000 annually.

All U.S. Households Hispanic Small Business Owners Index

Less than $25k 23% 9% 39

Less than $50k 64% 39% 61

$50k-$74k 18% 14% 78

$75k-$99k 13% 17% 131

$100k-$149k 13% 17% 131

$150k or more 10% 13% 130

Nielsen Scarborough USA 2015 Study Release

Geoscape, American Marketscape DataStream, Series 2015


. .All Hispanic Households Hispanic Business Owners29.0% 28.9%

18.2%

11.0%8.6%

4.6%7.1%

$100k-$149k more than $150kLess than $25k $25k-$49k $50k-$74k $75k-$99k

8.7%10.3% 10.6 %

20.8%

42.1%

Hispanic Owners by Household Income


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The Impact of Hispanic-Owned Businesses on the Financial Sector

Even though they are eager to become entrepreneurs, manyHispanics struggle to get their companies off the ground andimplement strong financial planning and cash managementpolicies for the future. This demand represents a hugeopportunity for banks and financial institutions to provideservices and products to this burgeoning segment of thepopulation. In fact, many financial institutions are banking on thegrowth of small minority-owned businesses at the center of U.S.economic expansion.

Hispanic business owners over index on commercial bankingservices and invest at a significantly higher rate when comparedto the general Hispanic population. According to data fromGeoscape and Scarborough, Hispanic businesses owners havea higher propensity to invest in stocks and mutual funds withtheir primary bank versus all Hispanic adults. Additional bankingservices such as online bill pay, online banking and home mort-gages are also utilized at a significantly higher rate whencomparing Hispanic business owners to the general U.S.Hispanic adult population.

$10%

3%

19%

2% 2%

31%

7%

13%

. .All Hispanic Adults Hispanic Business Owners

$

16%

10%

27%

$

*Nielsen Scarborough USA 2015 Study Release.

Home Mortgage* Money Market*

Online Banking*

Refinance HomeMortgage* Stock Investments*

Online Bill Paying*

23%

9%

25%

Invests in MutualFunds*

Uses Financial Planner*

9%6%




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The Contribution of Hispanic Businesses to the American Economy

Total Sales Receipts for Hispanic-Owned Businesses

Sources:

The fact that Hispanic -owned businesses in the UnitedStates are growing at an accelerated pace — fifteen timesthe national growth rate and that the trend has beensustained for at least the last 10 to 15 years manifests itselfboth in the growing number and size of Hispanic-ownedbusinesses and the total sales receipts that these firms aregenerating. To put this in context, during the latest 8-yearperiod from 2007 to 2015, Hispanic-owned business’revenue jumped by an astonishing 88 percent to nearly$661 billion.

All this means that Hispanics will have more economicclout, employ a greater proportion of the population andpurchase substantially more in goods and services thanthey do today. The dynamic growth of Hispanic-ownedbusinesses will likely transform the economic and politicallandscape in the United States in the years ahead.

Geoscape, American Marketscape DataStream,Series 2015

Nielsen Scarborough, USA+R1 2015

Kauffman Index or Entrepeneurial Activity, Robert Fairlie, April 2015

U.S. Census Bureau, Survey of Business Owners 2002



U.S. Census Bureau, Economic Census Summary 2002

U.S. Census Bureau, Economic Census Summary 2007

U.S. Census Bureau, Non-employer Statistics 2002

U.S. Census Bureau, Non-employer Statistics 2007

U.S. Census Bureau, 2013 County Business Patterns, April 2015

U.S. Department of Commerce, Bureau of Economic Analysis

Gross Domestic Product, Comprehensive Revision, Q2-2013

$245 B

$351 B

$517 B

$661 B*

. . . .2002 2007 2012 2015 Projected*

Projected*

For more information please call 1.888.211.9353 or visit our websiteDownload the American Marketscape DataStream Summary atwww.geoscape.com/AMDS

$661 Billionin Sales

an 88% increase.


HispanicBusinesses&Entrepreneurs ......2012-2015 2007-2012 0.5% 0.4% 7.5% 5.5% HispanicOwnedFirms...

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